The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&DAnother American pharmaceutical company had spent a year and a half trying to solve apathology problem affecting cell samples. Within a month after posting the problem onInnoCentive’s website, the solution was supplied by an unemployed protein crystallographerin San Francisco who received 10,000 dollars for the solution (Cantrell 2004).7.3.1 InnoCentiveInnoCentive was created in 2001 and is a spin-off from the pharmaceutical company EliLilly. Eli Lilly created the company because it needed to address the problem of increasingR&D costs. InnoCentive wanted to prove that the open innovation model works and that acompany can expand its access to the world’s talent. InnoCentive is today an independentcompany based in Andover, Massachusetts. According to company sources, InnoCentivehas a network of 80,000 problem solvers in 175 countries. Most of them live in China, theU.S., India and Russia. The problem solvers have backgrounds from academia, companiesor they are students, retirees, etc. Since InnoCentive was created by a pharmaceuticalcompany, this industry initially became its main focus. However, today InnoCentivehandles problem solving within biochemistry, biology, nanotechnology and material sciences,and plans to expand into other disciplines and technology areas.InnoCentive works constantly to build its network community and the skill sets of itsresearchers. InnoCentive has no customers (seeker clients) in Sweden today, but AliHussein, Chief Marketing Officer and Vice President of Global Markets at InnoCentive,says that they are starting to look more closely at Scandinavia for new customers. However,Sweden is among the top 20 of 175 countries when it comes to the number of problemsolvers.Companies announce research problems anonymously on InnoCentive’s website, alongwith the award amount for a solution. InnoCentive also assists with problem-formulationbefore it is posted on the website. The customer company itself decides which solutions areacceptable. The person who solves the problem has the right to the solution until a deal withthe company is made. Reportedly, there have been no issues with intellectual property rights(Hussein).Besides an annual fee of 80,000 dollars, InnoCentive gets a small posting fee and acommission on the rewards paid (Torode 2004). There are two different types of problemsor challenges: paper (theory) and lab challenges. Awards for paper challenges average about30,000 dollars, and lab challenges can be worth up to 100,000 dollars. The InnoCentivenetwork typically solves problems that are part of bigger problems or research projects andtherefore are short-term assignments. The model can not be used to solve extensiveproblems like finding the cure for breast cancer (Hussein). Since the business started,customers have awarded more than one million dollars for solutions to 75 problems.Compared to the total number of problems that have been posted from the start, thisrepresents a solution rate of 35 percent (Swiatek 2005).173